Store owner may face hurdles on “roll your own” cigarette machines

Charlie Saliby and his family, who own Guimond Farms in Fall River, are fighting a cigarette war of sorts — one that hasn’t officially started in Massachusetts but is hovering on the horizon.

“My parents opened this store about 16 years ago, and I got my college education so I could run the family business,” Saliby said during an interview last week.

Saliby, the son of immigrants, talked about finishing at the very top of his class at B.M.C. Durfee High School and at the University of Massachusetts Dartmouth as a business major.

He said he has a motto for success at the South End variety store at Rhode Island and Plymouth avenues, one that follows one principle: “I listen to my customers to see what they want.”

When his parents, Sami and Nouhad Saliby, his sister, Nicole, and he began struggling to make do with the store’s sales six years ago, Guimond Farms expanded its offering by obtaining a beer and wine license. Two years ago, the store added a full alcohol license.

The store — an established mom-and-pop store previously run by the Guimond family for about 30 years — has expanded in other ways, too. Next to its large wine display, it has a large selection of ice cream. The family also owns a laundromat next door.

One of its largest investments came recently in the form of two “roll-your-own” high-tech cigarette machines that allow smokers essentially to buy less-expensive pipe tobacco and cigarette rolling papers, and rent the machine.

Two months ago, the family bought one machine, the size of a heating boiler. Two weeks ago, they bought a second one. The investment cost $32,500 for each machine, Saliby said.

The reason for the expansion goes back to listening to customers.

A decade ago, cigarette smokers found the price of cigarettes — then approaching $4 a pack — was becoming prohibitive.

With federal and state governments tacking on significantly higher taxes the past few years, established brands now can cost about $7 to $8 a pack.

In the past few years, federal taxes on cigarettes increased from 39 cents to $1.01 a pack and taxes on cigarette-rolling tobacco also increased significantly. Massachusetts taxes jumped $1 to $2.51 in 2009, making it one of the highest-taxing states.

“When the price of cigarette packs went up,” Saliby said, “customers started buying loose tobacco rolling tubes and rolling their own cigarettes at home.”

The 8-ounce packages of pipe tobacco are taxed at a fraction of cigarette tobacco packs the past two years, according to published reports.

Saliby sells those products, including machines that roll individual cigarettes for $40 to $50.

For the person needing to roll a pack or two daily, that can take a long time, typically upwards of two hours to roll the 10 packs that come in a carton. In such instances, roll-your-own machines can come in very handy.

Roll Your Own Machine LLC, based in Girard, Ohio, with a distributor in Massachusetts, makes many of the machines.

Using the RYO machines that are available at 1,700 retail outlets and 40 states across the nation, a customer can produce 200 machine-rolled cigarettes — the equivalent of a carton — in 10 to 15 minutes, Saliby said.

Saliby said he learned about the opportunity from colleagues running convenience stores in Taunton, Brockton, New Bedford and elsewhere who bought them over the past year or so.

The process is simple and quick, Saliby said.

A customer empties an 8-ounce bag of pipe tobacco into a small hopper on the RYO machine. A box of 200 filtered paper tubes is loaded into another compartment. Then, the calibration, or packing level, is set and the machine is turned on.

Instructions come in a half-dozen languages, including English, Portuguese, Spanish, Russian and others.

Customers must be 18 or older to use the machines.

“We don’t do it for customers; they do it for themselves,” Saliby said. The exception is if there’s a glitch with the machinery.

After each cigarette runs through the machine, it drops into a plastic bin.

The cost is $29.73 total, including tax. At about $3 for 20 cigarettes, the number in a pack, it’s less than half of what most manufactured cigarettes cost, Saliby said.

The price breakdown includes $12.99 for various pipe tobacco brands taxed at 6.25 percent, just a fraction of cigarette tobacco taxes; $2.99 for the rollers; and $12.76 to rent the machine.

Still, Saliby has reason to fear the word “manufacture,” based upon what regulators are doing in other states, overtures from the Massachusetts attorney general’s office and federal initiatives.

“They’re trying to say people using the machines are manufacturers,” Saliby said. He emphasized that customers operate the store’s RYO machine as they would at home using smaller, personal, roll-your-own machines.

Retailers like him and marketers and lawyers involved with the RYO machines have been gearing up for battle over the past couple of years.

According to RYO Machines attorney Bryan Haynes in Richmond, Va., the U.S. Tobacco Tax and Trade Bureau of the Treasury Department issued a significant ruling on Sept. 30, 2010.

“They said any business offering these machines in a retail store for consumers to produce their own cigarettes, they have to obtain a permit … in order to allow consumers to rent the machines,” Haynes said.

It would be the same costly permit a Philip Morris or R.J. Reynolds needs to obtain.

In late 2010, lawyers for RYO machine obtained a temporary restraining order, then an injunction, in Girard, Ohio, stopping the federal mandate, Haynes said.

But Haynes said that, during the past three months, the office of Massachusetts Attorney General Martha Coakley has issued to some storeowners what’s called “Civil Investigative Demands,” or CIDs.

He declined to provide a CID example, even redacted, that was issued to one of the company’s clients. In general, he said, a CID is a demand for information about how the business operates — one step in the investigatory process.

Haynes said there have been court cases in a half-dozen states, one in New Hampshire that went to the Supreme Court and favored the state being able to collect cigarette taxes on an RYO machine owner.

There was another completed case in Alaska, one on appeal in West Virginia and cases pending in Connecticut, Wisconsin and Michigan, Haynes said.

The lawyer said they’d have “potential for concern” in Massachusetts because of attempted prosecution in other states.

Coakley’s office last week would not confirm any ongoing investigation into roll-your-own machines other than to say the office takes steps to investigate perceived illegal activity and breaking of any laws in general.

Saliby said he’s known of the state issuing CIDs to retailers, but his operation is new and he’s not received such a letter.

Within a “fact” list about RYO, the machine manufacturer said their 1,700 RYO filling machines nationwide have created 4,500 jobs; that retailers like Guimond receive territorial contracts and that “people have been rolling their own cigarettes for centuries.”

“The machines are becoming more and more popular,” Saliby said.

He said at their store, open seven days a week, they have 25 to 35 customers daily, more on weekends. He’s added a couple of employees, bolstered by increased tobacco and other sales, he said.
“I got these machines to give my customers an alternative to rolling their own cigarettes at home,” he said.

Leave a Reply

Your email address will not be published. Required fields are marked *

To prove you're a person (not a spam script), type the security word shown in the picture. Click on the picture to hear an audio file of the word.
Anti-spam image